He suggests that, if indeed there are no problems with Chinese FDI in the resource sector, we are inconsistent in recommending initiation of government-to-government arrangements for routine consultation between Australian and Chinese authorities that would serve to facilitate scrutiny of competition, corporate governance, and financial transparency issues and have the practical effect of strengthening that framework over time.

There is no inconsistency in this position. At no point do we suggest that there will be no competition and other issues to be dealt with in respect of Chinese or FDI from other sources or that there are no strategic interest in these matters with China. We carefully elaborate circumstances in the paper in which Chinese or other investments might appropriately be subject to review, but argue that the ‘national interest’ test serves those purposes adequately without additional ‘state-ownership’ or ‘resource buyer-ownership tests’. And our point in respect of this initiative is to advocate, as a strategic priority, market-strengthening regulatory engagement with China in a proactive way. This is a strategic interest but one that in no way should affect our usual treatment of Chinese foreign investments. It is important to be careful and clear in these distinctions of logic and argument.

Incidentally, contrary to Thirwell’s suggestion this initiative would not be ‘more of the same’ or await ‘settlement of and FTA’. What we had in mind was new arrangements of a kind that are currently not in place but might usefully be leveraged into place in the context we discuss.

We said in our paper that the detail of an initiative like that we suggested will need to be the subject of discussion elsewhere.

We are happy to start that discussion now.

We raised our proposal in the context of the concerns in particular about government-owned funds and enterprises.  We pointed out the direction of reform in China with respect to enterprises, including those which are state-owned, and the purpose of our suggestion was to support the institutional development in China that would in turn help sustain that reform.

That would help we argued dispel the:

uncertainty around these issues (which) already runs the risk of hindering exploitation of the industry’s potential and damaging our longer term political and security interests.

There was nothing discriminatory in our proposal. Some might be thinking about the relationship with China in the context of what can we get out of the free trade agreement negotiations. Thirlwell places his comment in that setting, and refers to dispute settlement processes and the like.  Such negotiations have a bias, inevitably, towards discriminatory measures.  Our colleague Philippa Dee makes this point in a her paper on East Asian Economic Integration and its Impact on Future Growth [pdf].

National institution building is more important. That’s what we sought through the suggestion of the government-to-government initiative in our paper, and we would contend that the benefits for Australia are likely to be more than those that might be eked from the small table on which sit the options for agreement in an FTA.

In addition, Thirwell says, that: ‘I am not quite as sanguine about the general idea of state-controlled foreign investment as the two authors appear to be in their paper.’  He explains that this is probably because we focus on the question of foreign direct investment in the resource sector, not FDI more generally. He then cites possible problems with state-owned enterprise in the media sector.

This would appear a bit of a red herring in that the media sector is subject to its own special scrutiny. But beyond the rights and wrongs of that, we would suggest, the approach to the government-owned investments in the resource sector that is outlined in our paper is more generally applicable. Although there may be some, like Mark (?), who reckon we should automatically take a special look at the BBC’s buying into Lonely Planet, for the record, we do not think that there’s much of a case for that kind of scrutiny either!

Thirlwell is right that the number of cases where foreign government ownership will represent a challenge to Australia’s national interest will be very small, that is to say not zero. We detailed in the argument of the paper how we had effective instruments for dealing with those circumstances in place already.